Financial Times on Nostr: The overlooked threats to the global financial system ========== Since the financial ...
The overlooked threats to the global financial system
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Since the financial crisis of 2007-08, regulators have attempted to de-risk the global financial system, but instability and flawed risk management persist. Recent episodes of turbulence in the US Treasury market and the UK government bond market highlight the vulnerabilities of the system. The rise of non-bank financial institutions, such as hedge funds and money market funds, has increased the opacity and risk in the financial system. The decline in public equity and the surge in private markets have also changed the structure of the financial system. The growing dependence on debt to drive economic growth, both domestically and internationally, raises concerns about debt sustainability. The accumulation of debt used to finance consumption depresses aggregate demand and hampers economic growth. The reliance on constant debt issuance to generate demand makes the economy susceptible to disruptions in financial markets. The notion of sovereign bonds as "safe" assets is challenged by rising default risk, fiscal profligacy, and high volatility. The US, as the provider of "safe" assets and the manager of the world's pre-eminent reserve currency, faces challenges in sustaining its financial hegemony. The financial system continues to act as a temporary solution to address imbalances and crises, as short-term fiscal and monetary remedies are applied instead of structural reforms.
#GlobalFinancialSystem #Debt #RiskManagement #NonbankFinancialInstitutions #PrivateMarkets #PublicEquity #SovereignBonds #UsTreasuryMarket #UkGovernmentBondMarket
https://www.ft.com/content/0b78c68b-c65c-4080-b779-17041c290eaa
==========
Since the financial crisis of 2007-08, regulators have attempted to de-risk the global financial system, but instability and flawed risk management persist. Recent episodes of turbulence in the US Treasury market and the UK government bond market highlight the vulnerabilities of the system. The rise of non-bank financial institutions, such as hedge funds and money market funds, has increased the opacity and risk in the financial system. The decline in public equity and the surge in private markets have also changed the structure of the financial system. The growing dependence on debt to drive economic growth, both domestically and internationally, raises concerns about debt sustainability. The accumulation of debt used to finance consumption depresses aggregate demand and hampers economic growth. The reliance on constant debt issuance to generate demand makes the economy susceptible to disruptions in financial markets. The notion of sovereign bonds as "safe" assets is challenged by rising default risk, fiscal profligacy, and high volatility. The US, as the provider of "safe" assets and the manager of the world's pre-eminent reserve currency, faces challenges in sustaining its financial hegemony. The financial system continues to act as a temporary solution to address imbalances and crises, as short-term fiscal and monetary remedies are applied instead of structural reforms.
#GlobalFinancialSystem #Debt #RiskManagement #NonbankFinancialInstitutions #PrivateMarkets #PublicEquity #SovereignBonds #UsTreasuryMarket #UkGovernmentBondMarket
https://www.ft.com/content/0b78c68b-c65c-4080-b779-17041c290eaa